Answer to Question #48168 in Other Economics for sara
2) “Emerging economies, such as China, pose a threat to the comparative advantage of the U.S.” How can such a statement be evaluated using the insights learned from the standard trade model? Provide full verbal and graphical explanation
2) Emerging economies, such as China, pose a threat to the comparative advantage of the U.S. It would appear so, given the rhetoric in recent months by American politicians and some business people, who have complained about the loss of U.S. jobs to China, unfair Chinese trade practices and a Chinese foreign currency policy that favors Chinese exporters who flood world markets with cheap goods. But faculty members at Wharton and other business schools say the complaints are misplaced and driven by politics.
“Free trade is good … and in the long run it’s good for both the U.S. and China,” says Wharton finance professor Franklin Allen. “In the short run, there will be adjustment costs [such as lost jobs]. Protectionist arguments are designed to address the sort of problems that occur in the short run, but protectionism is like pushing against the tide.”
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